Jul 05, 2021 04:54 PM EDT
Is a Rental Property the Perfect Post-College Investment?
If you're making good money after graduation, you may be planning ahead for your first big investment. Wiping out student loan debt, getting credit card balances under control, and building up your savings should be top priorities, but eventually, you'll want to find opportunities to make money as well.
For an investment opportunity that is more consistently profitable and lower risk than other options, look into real estate. There are plenty of ways to take advantage of the real estate market, including flipping houses and purchasing rental properties. Between the two, the latter is the best way for new investors to ensure a satisfying return on their investment.
Keep reading for a few reasons why rental properties make great first investment opportunities.
Spend Money, Make Money
Recent college graduates often stress over buying or renting homes themselves, mainly because they have no money. So the thought of earning and saving enough money for a rental property seems far-fetched. With proper planning and help, it doesn't have to be.
You can find great deals on foreclosed properties, apply for loans, or seek out other financing options to get started. Once you get over the hurdle of buying, you can start focusing on making money. Rental properties can make much more money than you think, offering a substantial secondary income that can really help you build your wealth.
Whether you start with a single-family rental or a vacation property to list on Airbnb, you can make significant monthly earnings right away. Short-term rentals like vacation properties often earn more because you can adjust the nightly rates, allowing for higher overall payments. If you study the market, you can figure out the best rates and practices for maximizing your profits and making your investment work for you.
Research & Track the Market
A major benefit of real estate investments is that beginners can learn from the market's history and follow current trends to get started. Before you make a big real estate purchase, you can learn how to choose the right property and develop the best possible rental strategy to ensure your success.
For single-family rentals, you'll need to think like your prospective tenants to make sure you're picking the right place. What would a family need? Check out the property's surrounding area and consider crime rates, school systems, parks and activities, shopping, and work opportunities nearby. If your property is positioned well in relation to these factors, it will be desirable to renters.
If you're buying an Airbnb investment property, you can use online tools to see market stats and compare its projected performance with local competitors. This is where you'll find out how to outperform other investors with better pricing, amenities, and more consistent bookings.
DIY Maintenance & Management
If you're concerned about extra costs for maintenance and management, there's good news--rental properties are very DIY-friendly. Even if you're new to the market, you can save money on repairs and upkeep by learning how to do the jobs yourself. But, of course, if those repairs go beyond your expertise, you'll need to hire a professional.
For single-family rentals, you may have to fix small things upon your tenants' requests. Oftentimes, these are mundane fixes like replacing broken fixtures or doing minor plumbing work. If you can get yourself up to speed with some standard home maintenance practices, you'll be good.
Vacation rentals require maintenance between each guest's visit. You'll be responsible for cleaning, replenishing necessities, and addressing repairs as needed. You could hire out for these services, but they're pretty easy to manage by yourself if you're trying to cut costs.
Further, real estate investors can take advantage of tax incentives created for their benefit. Costs like property taxes, mortgage interest, repair fees, and office expenses can be deducted, saving you some of the financial burdens from large or unexpected payments.
If you're looking for the ideal first investment opportunity, purchasing a rental property could be right for you. If the factors outlined above seem like something you could handle, take advantage of the market and set yourself up for long-term success!
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